{"id":1388,"date":"2023-01-11T10:47:09","date_gmt":"2023-01-11T10:47:09","guid":{"rendered":"https:\/\/letskipp.com\/blog\/taking-control-of-subscription-churn-to-optimize-payments\/"},"modified":"2024-12-05T14:03:47","modified_gmt":"2024-12-05T14:03:47","slug":"taking-control-of-subscription-churn-to-optimize-payments","status":"publish","type":"post","link":"https:\/\/letskipp.com\/blog\/taking-control-of-subscription-churn-to-optimize-payments\/","title":{"rendered":"Taking Control of Subscription Churn to Optimize Payments"},"content":{"rendered":"

Every company offering a subscription model experiences customer churn \u2014 whether you sell content, physical goods, or SaaS, B2B or B2C. Let\u2019s break down the primary scenarios in which companies lose subscribers into a few basic buckets\u2026 and see what, if anything, you can do about it:<\/p>\n

First is the category that is, to put it bluntly, \u201con you\u201d; you may have caused the problem, but it\u2019s almost always too late to fix it yourself for this individual: A subscriber wakes up one day and decides that your product simply isn\u2019t worth their money. Perhaps their needs have changed, they haven\u2019t been using it, or they conclude after a trial period that you aren\u2019t consistently delivering quality. Hopefully, it isn\u2019t only a periodic bad customer-provider match, and not an inherent, broader problem with your offering. Regardless, that customer is gone.<\/p>\n

The second cause is financial and is also mostly out of your control. Especially in these times of economic pressure, people cut back. For an independent contractor, for example, SaaS billing software is critical, but 14 subscriptions to industry content may not be. You can offer discounts and incentives within the cancel flow, but whereas in our first example, the product wasn\u2019t doing the job, here, a customer\u2019s personal finances leave you fewer options.<\/p>\n

These two examples are what we call voluntary churn. The customer makes an active decision, based on classic value-for-money considerations. Both offer some opportunity to save the relationship. You\u2019ll lose most of them regardless of what you do, but you might have a shot if you\u2019re creative and proactive.<\/p>\n

The Worst Case: Churn the Customer doesn\u2019t even Trigger<\/h2>\n

But there\u2019s another type of churn, and this one traditionally offers you virtually no control: The tactical, technical, systematic process of using a credit card to pay for the subscription. More specifically, we\u2019re talking about the customers who online subscription companies lose when their credit cards are declined. A recent Profitwell survey<\/a> reports that credit card declines account for 20-40% of B2B customer churn, so it\u2019s a phenomenon you can\u2019t ignore.<\/p>\n

Before we continue, let\u2019s be completely clear on why this scenario is particularly painful: A third party \u2014 namely the credit card issuer of the customer\u2019s card who you don\u2019t interact with directly \u2014 has the ability (and the right) to simply ruin your relationship with a customer by making them feel frustrated, confused, and yes, insulted. Worst of all, these customers often can\u2019t even distinguish between the players \u2014 they don\u2019t know where that rejection is coming from, and as a result, often blame you, the merchant.<\/p>\n

How the Scene Plays Out<\/h2>\n

Let\u2019s take a step back to review the process. You spend money and manpower on branding, advertising, website user experience, customer support, and many other funnel-filling tactics. Having acquired a customer, you ask for their credit card information for a one-time or recurring payment. If their card is rejected \u2014 perhaps it\u2019s expired or they are temporarily short of funds \u2014 they never even become a customer.<\/p>\n

But even worse is when all your efforts earned you a dedicated customer who has been with you for some time and is enjoying your product. That same rejection can trigger the dreaded churn phenomenon \u2013 even though it\u2019s an existing customer who you can trust and for whom you already have a reliable card on file.<\/p>\n

The bank or card issuer has a lot less skin in the game than you do, and would rather protect themselves with a conservative approach when there\u2019s a hint that there\u2019s some risk that they won\u2019t see the funds.<\/p>\n

Save the Transaction, Keep the Customer<\/h2>\n

To reduce credit card declines, you actually have a card to play: The bank is worried about carrying the risk\u2026alone. Yes, they have their own limited data sets and recognize that many transactions are, in fact, valid. But it\u2019s just too expensive to keep \u201ctossing the dice\u201d alone.<\/p>\n

How can you help encourage them to accept that risk? Simple: offer to share it.<\/p>\n

Kipp lets the card issuer send a request to the merchant just before declining a transaction. That request includes an \u201cask\u201d amount they would require as an incentivizing premium \u2014 usually a few percentage points of the total cost. On the merchant side, a parallel automatic, pre-configured set of algorithmic rules responds with a \u201cbid\u201d; it lets Kipp know how much you are willing to pay to authorize that transaction. If the numbers match, the transaction goes ahead, and everyone wins \u2013 the card issuer earns the commissions, the merchant keeps the customer (often with the ensuing recurring revenue), and of course, the customer has a fluid, successful experience.<\/p>\n","protected":false},"excerpt":{"rendered":"

Every company offering a subscription model experiences customer churn \u2014 whether you sell content, physical goods, or SaaS, B2B or B2C. Let\u2019s break down the primary scenarios in which companies lose subscribers into a few basic buckets\u2026 and see what, if anything, you can do about it: First is the category that is, to put … Read more<\/a><\/p>\n","protected":false},"author":4,"featured_media":1389,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1388","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"yoast_head":"\nTaking Control of Subscription Churn to Optimize Payments | Kipp<\/title>\n<meta name=\"description\" content=\"Credit card declines account for 20-40% of B2B customer churn. 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